Debunking Consumerism
I was wrong. About a lot of things. The more I research and dive deeper, the more I realize how little I knew about anything, be it climate change or how our whole economy works.
I wrote at the end of my last article that consumerism is the root cause of the problem of climate change. I was wrong on so many levels. Consumerism is not the root cause, and climate change is not the main problem. In fact, both of these are mere symptoms of something even more profound.
Have you ever heard of the term Productivism? Seems odd and unfamiliar right! Well, this term is not as popularized or understood as much as its counterpart, consumerism is. The proponents of productivism have managed to safeguard this term from reaching to the masses, while externalizing all the damage by blaming it on the consumers and consumerism.
We all know what consumerism is. It can be understood from many angles. From an economic perspective, it is the idea that increasing the consumption of goods and services is essential for economic growth and should be the ultimate goal of human civilization.
From a more social angle, consumerism is the belief that a person's well-being and happiness depends fundamentally on the acquisition of consumer goods in excess of the person's basic needs. It has made us believe that only material possession can lead to a good, prosperous, and fulfilling life.
The growth of consumerism can also be linked to politics. For countries to thrive politically and economically, capitalist competition for profits and markets had to be at the core of every country’s agenda. But what's underneath it all? Where did it come from?
Why did fostering consumerism become the sole goal of the entire economy?
The kind of emphasis we see today on consumerism wasn't always the case. In the early phases of the development of the industrial society, much of the focus revolved around the supply side of the market.
At the start of the industrial revolution, production speeds were slow, manufacturing technology was in its infancy, and as a result, goods were limited and scarce. Producers sold pretty much all products they produced, as long as the consumer could afford them.
The consumers consisted of the upper and middle class of society who were embracing luxury products. Even the politics focused on the interests, rights, and protection of supply side of the market, notably the producers, workers, and distributors. This period is also called the Production Orientation Era.
On 1st December 1913 something historic happened, which changed the face of manufacturing for the decades to come. Henry Ford, of the Ford Motor Company, installed the first-ever assembly line for the mass production of his Model T cars. This assembly line reduced the time it took to build the car from 12 hours to a mere one hour and 33 minutes, and Model T became the first car most people could actually buy. This concept often referred to as Fordism, formed the basis of industrialized mass production and advanced capitalism. Fordism is often credited with enabling the long postwar economic expansion.
This meant that there was no longer a constraint on the number of goods available. The producers now had more than they could sell, and the competition grew. The consumer base also increased as mass-produced goods were cheaper than ever, so more people could afford them.
This started the Sales Orientation Era, where the goal became to sell the increasing output of production in an increasingly crowded market. The primary focus here was on optimizing the distribution and communicating to the customer that one manufacturer's goods were better than the others.
"I believe we are on the threshold of a fundamental change in our popular economic thought, that in the future we are going to think less about the producer and more about the consumer."
- Franklin Roosevelt, 1932, From the book The Living Wage.
But in the 1960s, most of the mass markets of consumer durables started getting saturated, profit rates started declining, and intense competition grew to grab the consumers. The consumers became the bottleneck of the whole trade activity. To make people consume more at an ever-growing rate, a need for active marketing management was realized.
This was the onset of the Marketing Orientation Era, where sophisticated marketing tactics were developed, to study what consumers want, what more can be produced to meet those wants, how can one change the general perception of consumers to make them want more stuff.
Thus, born consumerism, where the entire focus of the economy shifted from the supply side towards the demand side. Suddenly it became all about consumers; instead of emphasizing the producer's right likes worker's rights and protection from unfair competition, the goal of the economy was now to protect the interest of consumers so that they can buy quality goods and services at lower prices, conveniently.
The tricks and tools of the trade -
To understand the repercussions of this shift more clearly, let's take an example. A big store like Walmart can easily demonstrate the underlying issues. To ensure lower prices and convenience for its customers, Walmart diminishes the rights of three types of producers - workers, suppliers, and small shop owners. Walmart is able to sell cheap stuff by reducing the workers' wages and job benefits, making its distribution more efficient to the point of exploiting the suppliers and killing all the small local competitors who can't afford to sell so cheaply. This is called externalizing the costs; this is how companies increase their profits by making some third party, often underprivileged, pay indirectly for the product.
This is just one of the many tactics that were deployed to increase consumption. Another such tool emerged from industrial design, the concept of planned and perceived obsolescence.
Perceived obsolescence is slightly different; here the companies try to convince the consumers that their current product is undesirable or less fashionable and they need to purchase the products more frequently, even though their existing product is functioning well. This tactic is applied to the products that are primarily desired for aesthetic and not functional reasons.
Products like clothes, footwear, accessories, cosmetics typically have cycles of desirability, called fashion trends. Apple phones are another example, where they release slightly updated models at regular intervals and emphasize their value as a status symbols, prompting users to upgrade as soon as possible.
All this, is heavily aided by constant advertising and marketing. The goal of advertising is to make consumers purchase new products, beyond their basic needs. They achieve this by first making you feel inadequate with your current lifestyle and possessions, labeling them uncool, old fashioned, and out of trend. Then they show you how you can change this state, by buying their latest product which is so much better than your current product and have tons of new features for you to enjoy. The shining world of advertisements persuades you into buying needless stuff with the promise that it'll make you happier.
But is consumption really driving our global economic growth? What is economic growth anyway ?
Whenever the economy is down, governments start to urge its citizens to spend more, shop more. Earlier this year, our finance minister said that India's GDP hit this low because people aren't buying enough. How much truth is in this statement that consumer expenditure is driving economic growth?
It is a very popular notion that consumerism is the engine of economic growth. Economist John M. Keynes coined this simplistic and straightforward theory that demand for goods facilitates the manufacturing of goods, creates jobs, and thus, stimulates the economy. If consumers don't buy enough, goods will pile up; factories will shut, workers will lose their jobs, and the economy will shrink.
This theory is largely correct, but it has several loopholes which were explored by other economists. As per Jean-Baptiste Say, before we can consume, we need to produce and earn a paycheck. Our various demands as consumers are enabled by our supply as workers/producers. That’s called the classical “Law of Markets”. Just like the production era came before the marketing era, the production of goods and services comes before consumption.
"Production is the source of demand."
- Jean Baptiste Say, the Say's Law.
The metric with which we measure our economic growth is Gross Domestic Product. But this concept of GDP isn't a measure of overall economic prosperity and social well being of a nation. GDP is simply sum total of all consumption, business investments, government spending, import and export goods. It doesn't take into account the activities of unorganized sector and income levels and savings of general population.
GDP = C + I + G + X - M
Where C is consumption, I is investments, G is government spending, X is export and M is import.
GDP figure tend to increase whenever there in an increase in consumption, even if its caused by war, disease spread, earthquake or any other natural calamity. During recession, it is always the investment that collapses first, consumption remain more or less the same.
But if consumption forms a significant part of how we measure our economic growth, it is obvious that consumerism would be heavily stressed upon by our businesses and politicians. Actually I feel its vice versa, since consumption is what makes businesses wealthier, it is included in GDP calculation, while savings is intentionally left outside of the scope of GDP, because it doesn't directly impact businesses. This way if our target is to increase the GDP, all the focus should be on increasing the consumption and nothing else.
World's leading economists have expressed same concerns and repeatedly felt the need to find a new way of assessing the true health of economy. Supply side economist Fredrick Hayek suggested that the ideal metric for measuring economy growth shouldn't be consumerism, it should be the savings and investments.
This is a complex theory, not as simple as Keynes’s one. Maybe that's why its not so much lauded by our politicians, who have embraced Keynesian theory as the fundamental of modern economics. To understand Hayek's theory more succinctly, please carefully read this Forbes article; I just couldn't explain it better than this one has.
But in a nutshell, businesses produce goods and services not because consumers necessarily need them or even want them; they do it so they can keep extracting, producing, profiting and create employment. If consumerism was itself driving the markets, why would companies even need to spend billions on advertising!
"Productivist capitalism has slowly given way to consumerist capitalism."
- Benjamin Barber, From the book Consumed.
The point is, all this emphasis we put on consumerism is gratuitous; the real focus for problem solving needs to be on Productivism instead. Its productivism that has caused consumerism, not the other way around. Its productivism that has been fueling extraction based linear economy. Its productivism, that is responsible for rapid resource depletion, water crisis, carbon emissions, environmental degradation, biodiversity loss, global waste crisis and of course, climate change.
In the next article, I'll be exploring what is productivism and what are its adverse impacts on our environment and in our society. Stay curious!